Allahabad High Court’s Lucknow Bench ordered reconsideration of a GST dispute where tax was paid under CGST and SGST instead of IGST. The Division Bench held that payment under a wrong head does not amount to tax non-payment absent liability dispute.
LUCKNOW: The Allahabad High Court, Lucknow Bench, directed the authorities to re-examine a case involving GST payment made under the CGST and SGST heads instead of IGST. The direction came while hearing a writ petition filed by the assessee, M/s Ocean E Mart.
The division Bench of Justice Shekhar B. Saraf and Justice Manjive Shukla reaffirmed that payment of Goods and Services Tax (GST) under an incorrect head does not amount to non-payment of tax, particularly when there is no dispute regarding the quantum or liability.
Factual Background Of the Case:
The assessee, M/s Ocean E Mart, had paid a total sum of Rs 1,41,63,327.46 towards GST for the assessment year 2018–2019. However, the payment was inadvertently made under the CGST and SGST heads instead of the appropriate IGST head.
After discovering the mistake, the petitioner informed the tax authorities by invoking Section 73(3) of the GST Act, which permits voluntary payment prior to the issuance of a show cause notice. Nevertheless, the Deputy Commissioner, State Tax, Lucknow, issued an order dated 27.01.2024 under Sections 73 and 161 of the GST Act, treating the matter as a case of non-payment of IGST and raising a demand accordingly.
Challenging this action, the petitioner filed a writ petition before the Allahabad High Court under Article 226 of the Constitution, seeking setting aside of the assessment order and appropriate adjustment of the tax already remitted.
Claims and Arguments Of the Petitioner
The petitioner sought the following substantive reliefs from the Court:
First, a writ in the nature of certiorari to quash the order dated 27.01.2024 passed by the Deputy Commissioner, State Tax, Lucknow Sector-22, for the assessment year 2018–2019, issued under Section 73 read with Section 161 of the GST Act, in the interest of justice.
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Second, a writ in the nature of mandamus directing the concerned authority to resolve the dispute by appropriately adjusting the tax amount under the IGST head and to refund the excess payment, along with interest at the rate of 18 per cent, since the petitioner had already deposited a total sum of ₹1,41,63,327.46 under the CGST and SGST heads.
The petitioner contended that the tax amount which was required to be paid under the IGST head was mistakenly deposited under the CGST and SGST heads. It was submitted that this error was duly brought to the notice of the original authority by invoking Section 73(3) of the GST Act. Despite this disclosure, the authorities failed to consider the payments already made and proceeded to fasten liability on the petitioner on the ground of non-payment of IGST.
Section 73(3) Provides that,
“Where a notice has been issued for any period under sub-section (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under sub-section (1), on the person chargeable with tax.”
It was further argued that once the CGST and SGST payments are duly accounted for, the petitioner has in fact paid an amount exceeding the actual IGST liability and is therefore entitled to a refund. In support of these submissions, learned counsel for the petitioner placed reliance on the judgment of the Kerala High Court in Saji S., Proprietor & Others v. Commissioner, State GST Department & Another (WP(C) No. 35868 of 2018, decided on 12.11.2018).
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The Kerala High court Held that payment of GST under an incorrect tax head does not amount to non-payment, and authorities must allow adjustment or refund where tax liability has otherwise been duly discharged.
The respondents contended that the GST framework does not provide any mechanism for transferring tax amounts paid under the CGST and SGST heads to the IGST head. However, they fairly acknowledged that the petitioner had indeed discharged the tax liability, albeit by depositing the amount under an incorrect head.
Decision of the court:
Accordingly, the court to set aside and quash the impugned orders, with a direction to the authorities to re-examine the matter by duly considering the tax amounts already paid under the CGST and SGST heads as payments towards IGST.
The Court further clarified that if any excess amount is found refundable, the same shall be released to the petitioner without delay in accordance with Section 77 of the GST Act.
Case Title: Ocean E Mart Vs State of U.P (Allahabad High Court)
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